The Interim Trading Skills of Institutional Investors

46 Pages Posted: 27 Mar 2008 Last revised: 10 Jun 2010

See all articles by Andy Puckett

Andy Puckett

University of Tennessee, Knoxville

Xuemin Sterling Yan

University of Missouri - Columbia

Multiple version iconThere are 2 versions of this paper

Date Written: June 10, 2010

Abstract

Using a large proprietary database of institutional trades for the period 1999-2005, this paper examines the interim (i.e., intra-quarter) trading skills of institutional investors. We find strong evidence that institutional investors earn significant abnormal returns on their intra-quarter round-trip trades. Furthermore, the stocks institutions buy significantly outperform the stocks institutions sell within the quarter, suggesting that these institutions have superior skills in timing their trades. More importantly, these interim trading skills are persistent, and the persistence is driven primarily by skilled portfolio managers as opposed to unskilled managers. Our study complements prior studies that use quarterly institutional holdings data, while suggesting that these studies have likely understated the investment skills of institutional investors.

Keywords: Institutional Investors, Performance, Performance Persistence, Trading Skill

JEL Classification: G10, G11, G14, G23

Suggested Citation

Puckett, Andy and Yan, Xuemin Sterling, The Interim Trading Skills of Institutional Investors (June 10, 2010). AFA 2009 San Francisco Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1107953 or http://dx.doi.org/10.2139/ssrn.1107953

Andy Puckett (Contact Author)

University of Tennessee, Knoxville ( email )

437 Stokely Managment Center
Knoxville, TN 37996
United States

Xuemin Sterling Yan

University of Missouri - Columbia ( email )

Robert J. Trulaske Sr. College of Business
427 Cornell Hall
Columbia, MO 65211-2600
United States
573-884-9708 (Phone)
573-884-6296 (Fax)

HOME PAGE: http://business.missouri.edu/yanx/

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